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Why you should care about your pension pot

When you are young it is easy to think you have loads of time to save for your pension. However, time soon runs away with you, so the younger you start the better. A decent pension pot will give you so many more choices in later life and ensure you have a comfortable retirement.

By the time you hit your 40s and 50s, it is likely you will have several pension pots sitting with various ex-employers. I know I have! It can be hard to keep track of them and there may even be some you have forgotten about. It is really important to track these down when you are attempting to forecast what your pension pot is likely amount to. If you want to find a lost pension, the Pension Tracing Service may have contact details. Alternatively, PensionBee can help trace and transfer pensions.

I am now 55, so I am actively planning for my retirement. Ideally I would like to retire in 5 years time. Because I have pension pots all over the place I have decided to sign up with Pension Bee to get them all in one place and work out exactly what my monthly pension will be and when I can afford to retire. I can see whether I need to pay in more or whether I can afford to withdraw any early if I want to as well.

Calculating your income

I used the PensionBee calculator, and was pleasantly surprised to find that, if I continue contributing as much as I am currently, I will hit my target of an annual pension of around £24,ooo per year. This includes my state pension, which I won’t actually be able to claim until I am 67, however. To bridge the gap (and because I want to do some writing on a self employed basis anyway), I think some kind of part time work will be essential in my case.

The calculator gives you the opportunity to mess around with factors like your retirement age or adding a lump sum from an inheritance, for example. I might decide to keep working until I am 65, in which case my projected retirement income will increase to over £28,000 pa.

If it was a lot less than I was expecting, I could choose to start adding extra to the pot now. Perhaps I could scrape together another £100 a month to ensure a better retirement fund.

Please note, however, that the estimated retirement income the calculator gives you is a projection based on buying an annuity and is not a guaranteed income.

Some interesting stats

I am pretty happy with my projection, as according to PensionBee’s analysis the average pension pot across the UK is just £21,441. The situation is better or worse depending on which area of the UK you live in, with a clear north-south divide.

Women are generally predicted to be worse off than men in their retirement. The average female pension pot in the UK is only £16,083, whereas men have saved £23,416 on average, according to PensionBee. With more women working full time, this may improve in years to come, but we still tend to take on more caring and childcare responsibilities. This means more part time work, fewer opportunities for promotion and more career gaps.

I am glad now that I always chose to pay into a pension fund with pretty much every employer I have ever had.

As I am 55, I could withdraw 25% of my pension pot tax free. However, as I am still earning I have decided that this wouldn’t be the right option for me at the moment. I would urge you to get independent financial advice before withdrawing funds from your pension pot.

What will your state pension pay you?

It is also worth checking your state pension forecast, which you can do on the GOV.UK website here and you can also find out when you allowed to claim it here.

This is what mine tells me I will get, but I can’t claim until 2030! If you are young, I would say not to count on any form of state pension. It seems they are increasing the age you can claim all the time. My 26 year old daughter won’t be able to claim hers until she is 68!

Charges

PensionBee charge a single annual management fee, unlike some other providers who add all sorts of other fees that can eat into your pension pot if you aren’t careful. For more information on these fees, see here. PensionBee is authorised and regulated by the Financial Conduct Authority and is a member of the Association of British Insurers.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.